The Small Business and Unfair Contract Terms Act commenced on 12 November 2016.
The Act amends the ASIC Act and the Australian Consumer Law (“ACL”) to protect small businesses from unfair terms in business-to-business standard form contracts . The law applies to any new or renewed contract entered into on or after 12 November 2016. If an existing contract is varied on or after 12 November, the law also applies to the varied terms.
The law applies to contracts between businesses where one of the businesses employs less than 20 people and the contract is worth up to $300,000 in a single year or $1 million if the contract runs for more than a year.
Contract terms that may be unfair include:
- terms that enable one party (but not another) to avoid or limit their obligations under the contract;
- terms that enable one party (but not another) to terminate the contract;
- terms that penalise one party (but not another) for breaching or terminating the contract;
- terms that enable one party (but not another) to vary the terms of the contract.
The Australian Competition and Consumer Commission has published a report into potentially unfair contract terms following its review of 46 small business standard form contracts across seven industries.
The report focuses on standard form contracts in the following sectors:
- advertising
- retail leasing
- franchising
- agriculture
- independent contracting
- telecommunications
- waste management.
The report provides guidance to these industries about these specific concerns, but also serves as general guidance to businesses operating in other industries about the kinds of terms that may be considered unfair following the changes to the law.
If a court makes a declaration that a term is unfair and a party subsequently seeks to apply or rely upon the unfair term, it is a contravention of the ACL (or the ASIC Act), and the court may grant one of the following remedies:
- an injunction preventing the party from acting upon the term;
- an order to provide redress to non-party small businesses;
- any other orders the court thinks appropriate.
